MILWAUKEE, Oct. 27, 2022 (GLOBE NEWSWIRE) — STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended October 2, 2022.
First Quarter
Net sales for the first quarter ended October 2, 2022 were $120.4 million, compared to net sales of $100.3 million for the first quarter ended September 26, 2021. Net income was $128,000 in the current year first quarter, compared to net income of $101,000 in the prior year first quarter. Diluted earnings per share for the current year quarter and during the prior year first quarter were $0.03.
Despite current year quarter net sales growth of 20% driven by improvement in semiconductor chip availability, profitability remained relatively unchanged compared to the prior year first quarter primarily due to higher inflationary costs of materials and labor.
Net sales to each of our customers in the current year quarter and prior year quarter were as follows (in thousands):
| Three Months Ended | |||||||
| October 2, 2022 | September 26, 2021 | ||||||
| General Motors Company | $ | 38,150 | $ | 25,684 | |||
| Ford Motor Company | 24,616 | 17,695 | |||||
| Stellantis | 17,155 | 16,560 | |||||
| Tier 1 Customers | 17,309 | 11,975 | |||||
| Commercial and Other OEM Customers | 14,826 | 17,412 | |||||
| Hyundai / Kia | 8,304 | 11,015 | |||||
| TOTAL | $ | 120,360 | $ | 100,341 | |||
Sales to General Motors Company, Ford Motor Company and Stellantis in the current year quarter increased over the same period in the prior year quarter due to higher vehicle production volumes resulting from improved global semiconductor chip availability relative to the prior year period. Specifically, sales growth to General Motors Company and Ford Motor Company in the current year quarter was attributed to higher production volume of the GMC Sierra, Chevy Silverado and Ford F-150 family of pickup trucks for which we supply a wide range of components. Sales to Tier 1 Customers improved in the current year quarter compared to the prior year quarter due to higher vehicle production volumes relating to the semiconductor chip availability referenced above. Sales to Commercial and Other OEM Customers, which are comprised of aftermarket products and vehicle access control products, such as latches, fobs, driver controls and door handles, declined compared to the prior year quarter due to continued semiconductor chip availability issues for aftermarket keys. The increase in availability of semiconductor chips in the current year quarter were allocated toward the production of components for production vehicles ahead of aftermarket products and, therefore, sales to the aftermarket customers continued to be adversely impacted by the semiconductor chip shortages in the current year quarter. The decreased sales to Hyundai / Kia in the current year quarter were due to lower levels of production of the Kia Carnival compared to the prior year.
Gross Profit margins declined to 10.4% in the current year quarter compared to 12.5% in the prior year quarter primarily due to higher costs of raw materials and purchased materials as well as increased costs in our Mexican operations related to the mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2022.
Engineering, Selling and Administrative expenses increased $579,000 in the current year quarter compared with prior year quarter primarily driven by new product engineering development associated with future business growth opportunities. Despite the higher spending, expenses as a percent of net sales in the current year quarter were 10.6% compared to 12.1% in the prior year quarter due to higher net sales.
Included in Other (Expense) Income, Net in the current year quarter compared to the prior year quarter were the following items (in thousands of dollars):
| October 2, 2022 | September 26, 2021 | ||||||
| Equity (Loss) Earnings of VAST LLC Joint Venture | $ | 527 | $ | (251 | ) | ||
| Net Foreign Currency Transaction Gain (Loss) | 132 | 180 | |||||
| Other | (422 | ) | (50 | ) | |||
| $ | 237 | $ | (121 | ) | |||
The equity gain of VAST LLC in the current year quarter related primarily to the improved global semiconductor chip availability referred to above that improved sales and profitability in our VAST China operation as compared to the same period in the prior year quarter.
Frank Krejci, President and CEO commented: “Current quarter earnings have been negatively impacted by higher labor costs and escalating price levels of plastic resins, zinc and steel. Given the nature of our long-term customer contracts, implementing price increases to offset these recent changes in costs has been challenging in the short term. Despite these cost pressures and continued constrained volumes by our customers, we achieved profitability for the quarter.
With a strong balance sheet, we have been able to maintain a heightened inventory position relative to that of pre-pandemic levels to mitigate ongoing supply chain issues and we continue to make investments in improving processes and adding equipment which will provide efficiencies for years to come. Strategically, we are making progress in being recognized as an innovative supplier to the fast-growing segment of the market focused on the development of Electric Vehicles. We also continue to make progress implementing the significant amount of business won last year and investment opportunities for growth.”
STRATTEC designs, develops, manufactures and markets automotive Access Control Products, including mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings, latches, power sliding side door systems, power lift gate systems, power deck lid systems, door handles and related products. These products are provided to customers in North America, and on a global basis through a unique strategic relationship with WITTE Automotive of Velbert, Germany and ADAC Automotive of Grand Rapids, Michigan. Under this relationship, STRATTEC, WITTE and ADAC market each company’s products to global customers under the “VAST Automotive Group” brand name. STRATTEC’s history in the automotive business spans over 110 years.
Certain statements contained in this release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” and “would.” Such forward-looking statements in this release are inherently subject to many uncertainties in the Company’s operations and business environment. These uncertainties include general economic conditions, in particular, relating to the automotive industry, consumer demand for the Company’s and its customers’ products, competitive and technological developments, customer purchasing actions, changes in warranty provisions and customer product recall policies, work stoppages at the Company or at the location of its key customers as a result of labor disputes, foreign currency fluctuations, uncertainties stemming from U.S. trade policies, tariffs and reactions to same from foreign countries, the volume and scope of product returns, adverse business and operational issues resulting from the global supply chain disruptions, the semiconductor chip shortages and the continuing effects of the coronavirus (COVID-19) pandemic, matters adversely impacting the timing and availability of component parts and raw materials needed for the production of our products and the products of our customers and fluctuations in our costs of operation (including fluctuations in the cost of raw materials). Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this release. In addition, such uncertainties and other operational matters are discussed further in the Company’s quarterly and annual filings with the Securities and Exchange Commission.
STRATTEC SECURITY CORPORATION
Condensed Results of Operations
(In Thousands except per share amounts)
(Unaudited)
| First Quarter Ended | |||||||
| October 2, 2022 | September 26, 2021 | ||||||
| Net Sales | $ | 120,360 | $ | 100,341 | |||
| Cost of Goods Sold | 107,864 | 87,792 | |||||
| Gross Profit | 12,496 | 12,549 | |||||
| Engineering, Selling & Administrative Expenses | 12,700 | 12,121 | |||||
| (Loss) Income from Operations | (204 | ) | 428 | ||||
| Interest Expense | (129 | ) | (48 | ) | |||
| Other Income (Expense), Net | 237 | (121 | ) | ||||
| (Loss) Income before Provision for Income Taxes and Non-Controlling Interest | (96 | ) | 259 | ||||
| (Benefit) Provision for Income Taxes | (36 | ) | 37 | ||||
| Net (Loss) Income | (60 | ) | 222 | ||||
| Net Loss (Income) Attributable to Non-Controlling Interest | 188 | (121 | ) | ||||
| Net Income Attributable to STRATTEC SECURITY CORP. | $ | 128 | $ | 101 | |||
| Earnings Per Share: | |||||||
| Basic | $ | 0.03 | $ | 0.03 | |||
| Diluted | $ | 0.03 | $ | 0.03 | |||
| Average Basic Shares Outstanding | 3,899 | 3,830 | |||||
| Average Diluted Shares Outstanding | 3,929 | 3,893 | |||||
| Other | |||||||
| Capital Expenditures | $ | 4,718 | $ | 2,789 | |||
| Depreciation | $ | 4,497 | $ | 5,057 | |||
STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
| October 2, 2022 | July 3, 2022 | ||||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | 10,330 | $ | 8,774 | |||
| Receivables, net | 76,631 | 75,827 | |||||
| Inventories, net | 75,048 | 80,482 | |||||
| Other current assets | 29,052 | 23,149 | |||||
| Total Current Assets | 191,061 | 188,232 | |||||
| Investment in Joint Ventures | 26,023 | 26,344 | |||||
| Other Long Term Assets | 11,901 | 12,375 | |||||
| Property, Plant and Equipment, Net | 91,194 | 91,729 | |||||
| $ | 320,179 | $ | 318,680 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Current Liabilities: | |||||||
| Accounts Payable | $ | 40,806 | $ | 43,950 | |||
| Other | 40,761 | 37,525 | |||||
| Total Current Liabilities | 81,567 | 81,475 | |||||
| Accrued Pension and Post Retirement Obligations | 1,744 | 1,722 | |||||
| Borrowings Under Credit Facility | 13,000 | 11,000 | |||||
| Other Long-term Liabilities | 3,985 | 4,070 | |||||
| Shareholders’ Equity | 343,957 | 343,103 | |||||
| Accumulated Other Comprehensive Loss | (19,320 | ) | (18,657 | ) | |||
| Less: Treasury Stock | (135,569 | ) | (135,580 | ) | |||
| Total STRATTEC SECURITY CORPORATION Shareholders’ Equity | 189,068 | 188,866 | |||||
| Non-Controlling Interest | 30,815 | 31,547 | |||||
| Total Shareholders’ Equity | 219,883 | 220,413 | |||||
| $ | 320,179 | $ | 318,680 | ||||
STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)
| First Quarter Ended | |||||||
| October 2, 2022 | September 26, 2021 | ||||||
| Cash Flows from Operating Activities: | |||||||
| Net (Loss) Income | $ | (60 | ) | $ | 222 | ||
| Adjustment to Reconcile Net Income to Net Cash Provided by Operating Activities: | |||||||
| Depreciation | 4,497 | 5,057 | |||||
| Equity (Earnings) Loss in Joint Ventures | (527 | ) | 251 | ||||
| Foreign Currency Transaction Loss (Gain) | 71 | (139 | ) | ||||
| Unrealized Loss on Peso Forward Contracts | 35 | 98 | |||||
| Stock Based Compensation Expense | 611 | 396 | |||||
| Change in Operating Assets/Liabilities | (48 | ) | (15,659 | ) | |||
| Other, net | 122 | 127 | |||||
| Net Cash Provided by (Used in) Operating Activities | 4,701 | (9,647 | ) | ||||
| Cash Flows from Investing Activities: | |||||||
| Additions to Property, Plant and Equipment | (4,718 | ) | (2,789 | ) | |||
| Net Cash Used in Investing Activities | (4,718 | ) | (2,789 | ) | |||
| Cash Flow from Financing Activities: | |||||||
| Borrowings on Credit Facility | 5,000 | 7,000 | |||||
| Repayment of Borrowings under Credit Facility | (3,000 | ) | (2,000 | ) | |||
| Dividends Paid to Non-Controlling Interest of Subsidiaries | (600 | ) | (600 | ) | |||
| Exercise of Stock Options and Employee Stock Purchases | 126 | 619 | |||||
| Net Cash Provided Financing Activities | 1,526 | 5,019 | |||||
| Foreign Currency Impact on Cash | 47 | (24 | ) | ||||
| Net Increase (Decrease) in Cash & Cash Equivalents | 1,556 | (7,441 | ) | ||||
| Cash and Cash Equivalents: | |||||||
| Beginning of Period | 8,774 | 14,465 | |||||
| End of Period | $ | 10,330 | $ | 7,024 | |||
